If you have been a client for long enough, you may remember how we showed that Central Banks don't set interest rates - the market does (see our blog article here).

The one indicator we have found to be the most accurate is 3-month Treasury Bills, which had shown a 25 bps increase since June, suggesting that SARB would have to follow suit.

...as it happened, on Thursday, SARB increased the Interest Rate by 25bps to 6.75% - a bit of a shock call.

The Rand liked this, and moved lower toward R13.70/$.

But was this a Rand positive or Rand negative decision?

There are always two ways of looking at it:

In this case, good for investors, but bad for the economy. Which makes forecasting the Rand direction based on interest rates no more than a coin toss.

By contrast, before anything was even remotely clear as to the interest rates, we had predicted days prior that we would see the Rand top out before make strides toward R13.83 and below to the Dollar(see above forecast at the start of this email)...

Ramaphosa also announced on Thursday some changes to his cabinet...

...thankfully not a Zuma-style #CabinetReshuffles, as this one had a bit more order and clarity in the decision making process.

However, analysts suggested that this did not meet the country's expectations, with only a few small changes, forced by the resignation of Gigaba and recent death of Edna Molewa.

Perhaps Ramaphosa is planning to play his hand at a later date, but for now, his small changes were well received by the markets along with the interest rate increase, as the Rand closed below R13.80 on Thursday...

There were many other headlines from the week:

Firstly, the big news heading into the new week came from US Fed Vice Chairman, who stated that "policy is getting close to neutral due to evidence of global growth slowing". In basic English, this means less rate hikes in 2019 - great news for the Rand and emerging-markets in general.

Trump's clever poker game has helped oil prices to plummet further, day after day. The WTI Crude has broken down to below USD 55 a barrel, and Brent Crude below USD 65 per barrel. Now just for the fuel prices to play ball, coming back to more affordable prices...

SA inflation has been a concern for some time now, and the IMF warned the Reserve Bank Regarding this, before their Interest Rate decision. They want the Reserve Bank to keep the inflation at the target of 4.5%, which is in the middle of their 3-6% target area. The latest figures came in for this month at 5.1% - a little higher than last month's 4.9%, but lower than the anticipated level of 5.3%. Hopefully the dropping of the oil prices and increase in Interest Rates will assist in bringing this lower.

Eskom continues to be a thorn in SA's economy, with every business relying on electricity, and not getting a consistent supply of it. It was revealed this last week that Eskom's capacity is at its lowest level in years. Coal supplies are low, and Eskom's Energy availability Factor (EAF) is now at its lowest level since 2004. These issues being sorted out are crucial to the economy going into 2019...

Lastly, Cryptocurrencies endured one of the most torrid weeks in a long time. Bitcoin went into absolute freefall, collapsing to nearly $4000! These are the lowest levels we have seen since the beginning of the Bitcoin "Gold Rush" back in September 2017. Not a good time to be a crypto investor - unless you are buying and getting everything at a major discount!

On Black Friday, there was some consolidation from the market, and we ended just over R13.80/$.

Some ground lost, but definitely not all the momentum built up over the last few weeks...

...now just for the ZAR to kick on and take advantage of it!

The Week Ahead (26-30 November 2018)

The market has retested lows this morning before retracing.

We have a few events that could be triggers - SA and trade balances being ones of interest. And of course the Brexit summit resumes today.

But, as we said last week, the fact is, you will never get any direction based on news and events.

Instead, we have found the best way is to forget looking at these for direction, and simply listen to what the market itself is saying - though price action and patterns of sentiment they display...

This is what the Elliott Wave Principle (our forecasting methodology) provides, which we use together with a combination of price-ratio analysis, momentum and time-cycle studies to give clients the most likely outcome for the next few days, weeks, months and years ahead.

Overall, based on our analysis, we still a Rand bullish bias in play, but don't expect it be all one-way traffic. To see the full details, why not give our service a 14 day test-drive.

Testimonials

"An improvement of about 18 cents on the dollar..."

"Thanks once again for the good service.

By using your forecast I was able to convert my US Dollars into Rands at the correct time and got top rate – an improvement of about 18 cents on the dollar. The last lot of money I brought in and I didn't use your forecast. It was stable around 11.30 for a few weeks so decide to bring it in. The day after it shot up to around 12. That wouldn't have happened if I had seen your forecast.

Thanks again"

Rob Wilmot
Cape Town, South Africa

"I saved at least R250,000... obviously one of the best investments of my life."

"You motivated me to transfer my foreign allowance instead of waiting for the rand to strengthen.

I am now very thankful that I did. I saved at least R250,000 by reading the rand exposé and looking at the ZAR/USD forecasts. It was obviously one of the best investments of my life.

Regards,"

Wynand Coetzer
Stellenbosch, South Africa

"If only I had listened to your prediction!!"

"I now see your point of how the markets can completely disregard fundamental events.

I would have thought the ZAR would strengthen ... but instead the market went in the opposite direction, costing me money for the time being.

If only I had listened to your prediction! It seems Elliot accounted for these bizarre movements without reason.

Wondering HOW the market works and WHERE it is going next?

Every week we send out an analysis on the previous week's movements, providing valuable information on WHY the market moved, WHAT caused the market to move, and WHEN and WHERE it is going it is going to move in the coming week! Join our Rand Reviews now via the form below